Procurement professionals can be a challenge for anyone trying to sell at reasonable prices, and especially so during periods when suppliers are being squeezed. Can you implement a pricing strategy that reflects the value of your products and services instead of simply giving in to all of Procurement’s demands? The answer is yes. Following are some tips for dealing with them.
First, we all have to recognize that professional buyers are what the title implies – professional. They are well schooled in how to do their jobs, and we need to respect them. However respecting them is not the same as fearing them, or giving in to everything. Professional buyers are usually good poker players. That means they want you to believe that price is the only thing that matters and they will tell you that. Frequently we hear from our clients that their products or services are superior to alternatives in the market, but Procurement does not care. They tell us “Price is the only thing that matters and if we do not meet the price we are given by Procurement, we will lose the business.” If that is true, either:
- Our client’s products and services are not actually superior, or
- They have done a poor job of determining the value to customers of that superiority, or
- They have done a poor job of articulating that value to the customers.
Keep in mind, when Procurement tells you they will switch suppliers, there is a cost to switching. Does that mean you can be substantially higher than your competitors? Maybe not, but it does mean you should be able to be somewhat higher. It also means that if the user of the products and services, not the professional buyer, does not want to switch suppliers, it will be hard for the buyer to force that switch.
If a professional buyer tells you he or she has a lower price from a competitor, walk through each of the areas where your product or service provides additional value. Give the buyer the range of what that extra value is worth and ask how those savings are reflected? If the buyer will not pay any additional value for those services, look to remove them from your offer and provide the customer a de-scoped service or product. It is also appropriate to ask the buyer what he can deliver to you. If he is really serious about saving money, can he order much larger quantities? Can he help you offset the hit from a lower price with a substantial increase in volume or additional products? Professional buyers know they are in negotiations, and they will often be prepared to give something to get something. Hold them to it.
Professional buyers have a job to do and goals to hit, much like each of us. They make assessments of where their opportunities for success lie, and they typically attack those areas first. If you are perceived as weak, you will be attacked early. However, if you have a strong defense and can articulate how your company adds value, they will likely go after other areas first. These buyers might also attack you, but tell you they are your friend and they are just trying to point you to the place where you can win the business. Unless you have a long relationship with them, and they have demonstrated they will reward you with differentiated prices, do not be fooled. The supposed friendship is just another way to play poker.
Dealing with procurement is not easy, but none of us are paid for easy jobs. Recognize who you are dealing with and respect them; but have confidence in and articulate the value of your company and negotiate with confidence. You will be surprised what you can accomplish.